Market Focus

A majority of the equities market rallied on Wednesday amid the FOMC meeting and further diplomatic results between Russia and Ukraine. The Dow Jones Industrial Average climbed 1.5% while the Nasdaq Composite gained 3.7%. The S&P 500 added 2.2% on Wednesday. From the FOMC meeting, the Fed announced it will raise its interest rates by 0.25%, and it will continue monitoring surging inflation. The Fed at the same time forecast a consensus funds rate of 1.9% by the end of the year. After the comment from the Fed, the stocks market declined initially but recovered in the final hour as the market believes that the hawkish posture would essentially help the economy in the long term.

Chinese stocks in both China and the US surged on Wednesday following several days of decline. The upside move came as China has signalled support for Chinese companies. The Chinese regulator mentioned that the crackdown should end soon. Alibaba jumped more than 35%, JD.com surged nearly 40%, and Pinduoduo rallied 56%. Moreover, the Nasdaq Golden Dragan China Index, which measures the performance of US-listed Chinese companies, was up 32.93%.

Meanwhile, the two largest cryptocurrencies, Bitcoin and Ethereum, edged higher for a third day on the Fed Chairman Jerome Powell’s upbeat economic tone. Recently, the crypto market seems to be mirroring the US stock market. Bitcoin was up around 3.5%, hitting $40,800 during the US session.

Main Pairs Movement

EURUSD rallied back above the 1.1 level despite the Fed’s hawkish stance. Compared to the Fed’s decision, the market seemed to weigh more on the hopes that the Russia- Ukraine war would have a diplomatic solution, which led to a weaker US dollar.

GBPUSD also turned upside on Wednesday as the market mood seemed to improve on the development of Russia and Ukraine. The US dollar lacked upside strength as the market has already expected the US Fed to raise its rate by 25 basis points.

Gold witnessed range-bound price movement on Wednesday, finishing with $1,927 per ounce. Gold’s price was not seriously impacted despite the Fed showing its aggressive tone and the development of diplomatic relationships between Russia and Ukraine. This was because the market was aware that the 25 basis points rate hikes can only curtail the galloping inflation now.

Technical Analysis

GBPUSD (4-Hour Chart)

Cable continued to trade higher as market sentiment continues to improve. However, ahead of the all-important Fed interest rate decision, Cable seems to have lost its upward momentum and has stalled out around the 1.3096 price region. British equities traded higher, while U.S. equity markets are also rallying. After the Fed announcement, Cable saw whiplash price action but was able to break through our estimated resistance level and climb to 1.3149 ahead of market close.

On the technical side, our previously estimated support level at around 1.3096 seems to have changed its polarity and become a near term resistance level for Cable. RSI for the pair is trending near neutral at 54.25. Cable is currently trading near its 50-day SMA and below its 100 and 200-day SMAs.

Resistance: 1.3185

Support: 1.2998, 1.2876

EURUSD (4-Hour Chart)

The Euro traded higher against the dollar for the second day. Market participants continue to expect a diplomatic solution to arise from Ukraine and Russia’s most recent peace talks. Rising U.S. treasury bond yields, however, continue to put downward pressure on EURUSD. Strong purchasing of the euro emerged post the U.S. Fed’s interest rate announcement.

On the technical side, EURUSD is challenging our previously estimated resistance level of 1.1003, but buying seems to have settled ahead of the FOMC meeting. RSI for EURUSD has currently settled around 54.3. On the four-hour chart, EURUSD is trading above the 50-day SMA but below its 100 and 200-day SMAs.

Resistance: 1.1003

Support: 1.0893, 1.0845

XAUUSD (4-Hour Chart)

Gold consolidated around the $1918 per ounce price region for the majority of the day but fell further as the American trading session began. Market participants are highly expecting a diplomatic solution to finally emerge between Ukraine and Russia, explaining why cash seems to be rotating out of the safe-haven asset. Post the FOMC interest rate announcement, the Dollar saw a sharp drop as the central bank foresees 6 more interest rate hikes by the end of the year, thus boosting the precious metal.

On the technical side, XAUUSD has lost the support at $1918, ahead of the FOMC meeting. Further downside support for XAUUSD sits at around the $1886 per ounce price region. RSI for the precious metal has fallen to a weak 31.34. On the four-hour chart, XAUUSD is currently trading below its 50, 100, and 200-day SMAs.

Resistance: 1961

Support: 1918, 1886